<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK (ONE)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1999
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to __________
Commission file number 0-26096
THE UNIMARK GROUP, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2436543
(State of incorporation or organization) (I.R.S. Employer Identification No.)
UNIMARK HOUSE
124 MCMAKIN ROAD
BARTONVILLE, TEXAS 76226
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 491-2992
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
As of November 12, 1999, the number of shares outstanding of each class of
common stock was:
Common Stock, $.01 par value: 13,938,326 shares
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets,
December 31, 1998 and September 30, 1999................................................. 3
Condensed Consolidated Statements of Operations
for the three months and nine months ended September 30, 1998 and 1999................... 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1998 and 1999.................................... 5
Notes to Condensed Consolidated Financial Statements - September 30, 1999................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...........................................................................19
Item 2. Sale of Unregistered Securities.............................................................19
Item 3. Defaults Upon Senior Securities.............................................................19
Item 4. Submission of Matters to a Vote of Security Holders.........................................19
Item 5. Other Information...........................................................................19
Item 6. Exhibits and Reports on Form 8-K............................................................19
SIGNATURES...........................................................................................20
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------- -------------
(NOTE 1) (UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ......................................... $ 4,247 $ 5,259
Accounts receivable - trade, net of allowance of $657 in
1998 and $369 in 1999 ........................................... 9,270 8,172
Accounts receivable - other ....................................... 731 827
Inventories ....................................................... 22,320 18,050
Income and value added taxes receivable ........................... 1,560 2,332
Prepaid expenses .................................................. 1,315 1,270
Net current assets of certain operations held for disposal ........ -- 3,748
------------- -------------
Total current assets ........................................ 39,443 39,658
Property, plant and equipment, net of accumulated depreciation of
$8,000 in 1998 and $9,116 in 1999 ................................. 41,347 41,073
Net non-current assets of certain operations held for disposal ....... -- 1,110
Deferred income taxes ................................................ 1,365 1,365
Goodwill, net ........................................................ 6,425 2,979
Identifiable intangible assets ....................................... 1,535 209
Due from related parties ............................................. 1,651 1,796
Other assets ......................................................... 1,747 1,757
============= =============
Total assets ................................................ $ 93,513 $ 89,947
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings ............................................. $ 21,654 $ 24,505
Current portion of long-term debt ................................. 763 603
Accounts payable - trade .......................................... 5,156 2,527
Accrued liabilities ............................................... 3,484 4,028
Income taxes payable .............................................. 38 --
Deferred income taxes ............................................. 5,873 5,624
------------- -------------
Total current liabilities ................................... 36,968 37,287
Long-term debt, less current portion ................................. 7,833 7,323
Shareholders' equity:
Common stock, $0.01 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 11,938,326 in
1998 and 13,938,326 in 1999 ................................... 119 139
Additional paid-in capital ........................................ 58,811 63,766
Accumulated deficit ............................................... (10,218) (18,568)
------------- -------------
Total shareholders' equity .................................. 48,712 45,337
============= =============
Total liabilities and shareholders' equity .................. $ 93,513 $ 89,947
============= =============
</TABLE>
See accompanying notes.
3
<PAGE> 4
THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -------------------------
1998 1999 1998 1999
---------- ---------- ---------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales ........................................ $ 15,303 $ 14,251 $ 56,385 $ 50,434
Cost of products sold ............................ 12,501 12,315 42,178 43,219
---------- ---------- ---------- ----------
Gross profit ..................................... 2,802 1,936 14,207 7,215
Selling, general and administrative expenses ..... 3,719 3,400 10,692 11,600
---------- ---------- ---------- ----------
Income (loss) from operations .................... (917) (1,464) 3,515 (4,385)
Other income (expense):
Interest expense ............................. (826) (702) (3,174) (2,024)
Interest income .............................. 67 38 157 84
Foreign currency transaction loss ............ (388) (29) (360) (670)
Other ........................................ 54 116 101 152
---------- ---------- ---------- ----------
(1,093) (577) (3,276) (2,458)
---------- ---------- ---------- ----------
Income (loss) before disposal of
certain operations and income taxes .............. (2,010) (2,041) 239 (6,843)
Operating results of certain operations
disposed of during 1999 (Note 2):
Net sales .................................. 4,248 4,574 11,866 13,658
Costs and expenses ......................... (4,269) (4,428) (11,764) (13,785)
---------- ---------- ---------- ----------
(21) 146 102 (127)
---------- ---------- ---------- ----------
Loss on disposal of certain operations ..... -- (1,517) -- (1,517)
---------- ---------- ---------- ----------
(21) (1,371) 102 (1,644)
---------- ---------- ---------- ----------
Income (loss) before income taxes ................ (2,031) (3,412) 341 (8,487)
Income tax expense (benefit) ..................... (880) (453) 11 (137)
---------- ---------- ---------- ----------
Net income (loss) ................................ $ (1,151) $ (2,959) $ 330 $ (8,350)
========== ========== ========== ==========
Basic and diluted income (loss) per share ........ $ (0.10) $ (0.21) $ 0.03 $ (0.63)
========== ========== ========== ==========
</TABLE>
See accompanying notes.
4
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THE UNIMARK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1998 1999
---------- ----------
(IN THOUSANDS)
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) ............................................................ $ 330 $ (8,350)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Loss on disposal of certain operations during 1999 .................... -- 1,517
Gain on sale of building ................................................ -- (59)
Depreciation and amortization ........................................... 2,448 3,300
Deferred income taxes ................................................... (612) (223)
Other ................................................................... 101 --
Changes in operating assets and liabilities:
Cash of operations held for sale ..................................... -- (400)
Receivables .......................................................... 747 (86)
Inventories .......................................................... (983) 3,497
Prepaid expenses ..................................................... 285 24
Payables and accrued expenses ........................................ 1,426 (2,157)
---------- ----------
Net cash provided by (used in) operating activities .......................... 3,742 (2,937)
INVESTING ACTIVITIES
Purchases of property, plant and equipment ................................... (2,695) (3,769)
Increase in identifiable intangible assets ................................... (122) --
Net proceeds from sale of building ........................................... -- 411
Increase (decrease) in amounts due from related parties ...................... 9 (146)
Increase (decrease) in other assets .......................................... 33 (31)
---------- ----------
Net cash used in investing activities ........................................ (2,775) (3,535)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock ................................... 13,425 4,975
Net (decrease) increase in short-term borrowings ............................. (12,193) 2,851
Proceeds from long-term debt ................................................. 240 334
Payments of long-term debt ................................................... (1,643) (676)
---------- ----------
Net cash (used in) provided by financing activities .......................... (171) 7,484
---------- ----------
Net increase in cash and cash equivalents .................................... 796 1,012
Cash and cash equivalents at beginning of period ............................. 1,237 4,247
---------- ----------
Cash and cash equivalents at end of period ................................... $ 2,033 $ 5,259
========== ==========
</TABLE>
See accompanying notes.
5
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THE UNIMARK GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Description of Business: The UniMark Group, Inc. ("UniMark" or the
"Company") conducts substantially all of its operations through its wholly-owned
operating subsidiaries: UniMark Foods, Inc. ("UniMark Foods"), UniMark
International, Inc. ("UniMark International"), Industrias Citricolas de
Montemorelos, S.A. de C.V. ("ICMOSA"), AgroMark, S.A. de C.V. ("AgroMark"),
Flavorfresh Limited ("Flavorfresh", formerly UniMark Foods Europe Limited) and
Grupo Industrial Santa Engracia, S.A. de C.V. ("GISE").
The Company is in the business of growing, processing, marketing and
distributing citrus and tropical fruit products, including chilled and canned
packaged fruits, citrus juices and oils and other specialty food ingredients.
Interim Financial Statements: The condensed consolidated financial
statements at September 30, 1999, and for the three and nine month periods then
ended are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results for the
interim period. These condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto,
together with Management's Discussion and Analysis of Financial Condition and
Results of Operations, contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 filed with the Securities and Exchange
Commission. The results of operations for the three and nine months ended
September 30, 1999 are not necessarily indicative of future financial results.
Year End Balance Sheet: The condensed consolidated balance sheet at December
31, 1998 has been derived from the audited consolidated financial statements at
that date but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
Reclassifications: In prior periods, the Company classified freight expense
and discounts and allowances associated with customer invoicing as operating
expenses. In connection with the Company's further automation of its order entry
and pricing systems to customers and in improving changes in controls over these
costs, these expenses are now being classified differently in the financial
statements. Discounts and allowances are now classified as a reduction in net
sales and freight expenses as a charge to cost of products sold. All prior and
current year operating results have been reclassified to conform to the new
presentation.
As discussed in Note 2 below, the Company disposed of several operations
subsequent to September 30, 1999. As of September 30, 1999 the net assets
associated with dispositions have been written down to their net realizable
values and reclassified as current and non-current assets on the accompanying
condensed consolidated balance sheets. The non-current assets represent that
portion of the selling prices that were received as long-term secured notes. The
condensed consolidated statements of operations have been reclassified for all
periods presented to disclose separately the operating results of the disposed
operations.
6
<PAGE> 7
NOTE 2 - DISPOSAL OF CERTAIN OPERATIONS
On September 15, 1999, the Board of Directors of the Company approved a
strategic plan for its packaged fruit segment designed to maximize shareholder
value by leveraging the Company's manufacturing facilities in Mexico with its
Sunfresh (R) brand and distribution network in the United States. Two of the
Company's subsidiaries, Les Produits Deli-Bon Inc. ("Deli-Bon") and Simply Fresh
Fruit, Inc. ("Simply Fresh") primarily sell private label fruit salads to the
food service industry and non-branded fresh cut fruit. Because the Company
believes that these lines of business offer less attractive growth opportunities
and lower operating margins than its Sunfresh (R) brand product lines and do not
further the Company's strategic objectives, the decision was reached to divest
these subsidiaries.
Subsequent to September 30, 1999, the Company completed the sale of its Canadian
subsidiary, Deli-Bon in a transaction valued at approximately $1.4 million, and
sold substantially all the assets of its California based subsidiary, Simply
Fresh, in a transaction valued at approximately $3.6 million. Both transactions
included cash payments at closing and short and long-term secured notes. In
addition, the Simply Fresh sale included the forgiveness of the remaining
payments under a certain covenant-not-to-compete and the return to the Company
of 68,182 shares of UniMark common stock owned by the principal buyer.
These transactions resulted in the Company recording losses of approximately
$1.5 million in the three-month period ending September 30, 1999. As of
September 30, 1999 the net assets associated with these sales have been
classified on the condensed consolidated balance sheets as both current and
non-current assets. The results of operations for both Deli-Bon and Simply Fresh
for the three and nine month periods ended September 30, 1998 and 1999 have been
reclassified from sales and expenses and included in the condensed consolidated
statements of operations as "Operating results of certain businesses disposed of
during 1999". Additionally, the reportable segment information for packaged
fruit in Note 8 has been restated to reflect the above reclassifications.
The following unaudited pro forma summary for the twelve months ended December
31, 1998 presents the consolidated operating results of the Company after giving
pro forma effect to the disposal of certain businesses in 1999 as if the
disposals had occurred on January 1, 1998 (In thousands):
<TABLE>
<CAPTION>
<S> <C>
Net sales $ 72,312
Loss before disposal of certain
operations and income taxes (2,307)
Operating income of certain businesses
disposed of during 1999 122
</TABLE>
Net loss and per share information would not change from amounts previously
reported.
NOTE 3 - LIQUIDITY AND CAPITAL RESOURCES
In recent years the Company has relied upon both bank borrowings and the
sale of equity securities to finance its working capital and certain of its
capital expenditure needs. The Company has existing loan agreements with its
primary lender to provide short-term dollar denominated debt, under revolving
credit facilities. At December 31, 1998, the Company was in violation of certain
consolidated financial performance covenants and restrictions under these
agreements, which the lender waived as of that date. In addition the primary
lender extended the maturity of the agreements from May 17, 1999 to January 3,
2000.
As of June 30, 1999 and September 30, 1999, the Company was not in
compliance with certain covenants of its loan agreements with its primary lender
including covenants that restrict transactions with affiliates and consolidated
financial performance ratios relative to working capital, total debt and debt
7
<PAGE> 8
service and, accordingly, was in default of these agreements. The Company has
received waivers of these defaults from the primary lender. Under terms of the
waivers, the primary lender agreed to maintain the committed lines of $9.5
million and reduced its discretionary uncommitted lines to the Company's Mexican
operations to $7.9 million, until March 1, 2000. In addition, at December 30,
1999 the interest rates associated with these lines will increase by 200 basis
points and the Company agreed to pledge under the agreements one of the
short-term notes associated with the sales discussed in Note 2. The primary
lender also consented to the sales associated with the disposal of certain
operations.
Presently the Company is in discussions with other financial institutions
regarding replacement of part, or all, of its existing debt with the primary
lender. In August 1999, the Company entered into an agreement with a Mexican
bank to provide a $3.5 million credit line. In November 1999, the Company
entered into a non-binding letter of intent with a Mexican investment trust for
long-term financing at GISE of up to $5.0 million which is subject to normal due
diligence and completion of documentation. This financing, if consummated, would
represent an equity interest in GISE of approximately 17.5%. There can be no
assurances that the Company will be able to find replacement financing or
consummate the GISE transaction. As a result of the sales associated with the
disposed operations, the Company will receive approximately $1.8 million of sale
proceeds during the remainder of 1999 that will be used for operations.
The Company's cash requirements for the remainder of 1999 and beyond will
depend primarily upon the level of sales, expenditures for capital equipment and
improvements, investments in agricultural projects, the timing of inventory
purchases and scheduled reductions of debt. Management believes that it will not
generate sufficient cash flow from operations until the year 2000 to service its
debt obligations and capital expenditures. As a result, the Company is
developing a restructuring plan to improve operating results and cash flow. The
plan will include actions to increase short-term cash flow as well as a program
to reorganize operations and improve operating efficiencies for the long-term.
Current levels of financing are insufficient to meet the Company's current cash
requirements for the remainder of 1999. The future success of the Company
depends on its ability to obtain replacement credit facilities for some or all
of its primary lender debt, obtain additional debt and raise additional equity
through the sale of unregistered securities. There can be no assurances that the
Company's efforts to raise such additional financing will be successful, and
under certain circumstance, the Company may be required to limit its operations,
dispose of certain assets and take other actions as considered necessary.
NOTE 4 - RELATED PARTY TRANSACTIONS
Effective January 1, 1995, the Company entered into a five year operating
agreement with Industrias Horticolas de Montemorelos, S.A. de C.V. ("IHMSA") to
operate a freezing plant located in Montermorelos, Nuevo Leon, Mexico. Pursuant
to the terms of the operating agreement, the Company is obligated to pay IHMSA
an operating fee sufficient to cover the interest payments on IHMSA's existing
outstanding debt (approximately $4.6 million). Collectively, the Vaquero
families are controlling shareholders in IHMSA. Certain members of the Vaquero
family are officers, shareholders and directors of the Company. During the
five-year term of the operating agreement, the Company has the right of first
refusal to buy the IHMSA facility at its then fair market value.
The Company subsequently elected to advance funds to IHMSA to retire certain
of its outstanding debt since, under the terms of the operating agreement, the
Company would benefit from the IHMSA debt reduction. At December 31, 1998
amounts due from IHMSA of $1.5 million, which are included in due from related
parties, represent cash advances applied to reduce IHMSA's outstanding debt.
This amount is expected to be applied to the purchase price when, and if, the
Company elects to exercise its purchase option.
Subsequent to December 31, 1998, the Company loaned funds to IHMSA on a
short-term basis at prevailing interest rates. As of June 30, 1999, unpaid loans
amounted to $1.2 million. Subsequent to June 30, 1999, IHMSA repaid all of the
loans to the Company.
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NOTE 5 - CAPITAL STOCK
On March 29, 1999, the Company sold 2,000,000 newly issued shares of common
stock at a purchase price of $2.50 per share, for an aggregate purchase price of
$5,000,000 to M & M Nominee L.L.C. ("M & M"). In connection with the
transaction, M & M surrendered options to acquire an additional 2,000,000 shares
of common stock at a purchase price of $4.5375 per share issued to them in July
1998.
NOTE 6 - EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -----------------------
1998 1999 1998 1999
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
NUMERATOR
Net income (loss) ..................................... $ (1,151) $ (2,959) $ 330 (8,350)
DENOMINATOR
Denominator for basic earnings per share -
weighted average shares outstanding ................. 11,363 13,938 9,528 13,301
Effect of dilutive securities:
Employee and director stock options ................. -- -- 40 --
Warrants ............................................ -- -- 1 --
---------- ---------- ---------- ----------
Dilutive potential common shares ...................... -- -- 41 --
---------- ---------- ---------- ----------
Denominator for diluted earnings per share -
weighted average shares outstanding adjusted for
assumed conversions ................................. 11,363 13,938 9,569 13,301
========== ========== ========== ==========
Basic and diluted earnings (loss) per share ........... $ (0.10) $ (0.21) $ 0.03 $ (0.63)
========== ========== ========== ==========
</TABLE>
At September 30, 1998 the Company had 314,000 stock options and warrants
outstanding and at September 30, 1999 had 431,000 stock options outstanding that
were not included in the per share calculations because their effect would have
been anti-dilutive.
NOTE 7 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Finished goods:
Cut fruits .................... $ 12,212 $ 7,913
Juice and oils ................ 1,663 3,014
------------- -------------
13,875 10,927
Pineapple orchards ................ 2,964 2,770
Raw materials and supplies ........ 4,376 3,195
Advances to suppliers ............. 1,105 1,158
------------- -------------
Total .................. $ 22,320 $ 18,050
============= =============
</TABLE>
9
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NOTE 8 - SEGMENT INFORMATION
The Company has two reportable segments: packaged fruit and juice and oil.
<TABLE>
<CAPTION>
PACKAGED JUICE
FRUIT & OIL TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 30, 1998
Revenues from external customers ......... $ 10,326 $ 4,977 $ 15,303
Inter-segment revenues ................... 33 -- 33
Segment profit (loss) .................... (1,897) 503 (1,394)
THREE MONTHS ENDED SEPTEMBER 30, 1999
Revenues from external customers ......... $ 11,927 $ 2,324 $ 14,251
Inter-segment revenues ................... 1 -- 1
Segment (loss) ........................... (1,550) (8) (1,558)
NINE MONTHS ENDED SEPTEMBER 30, 1998
Revenues from external customers ......... $ 37,194 $ 19,191 $ 56,385
Inter-segment revenues ................... 176 -- 176
Segment profit (loss) .................... (895) 2,674 1,779
NINE MONTHS ENDED SEPTEMBER 30, 1999
Revenues from external customers ......... $ 42,679 $ 7,755 $ 50,434
Inter-segment revenues ................... 300 -- 300
Segment (loss) ........................... (4,222) (1,123) (5,345)
</TABLE>
The following are reconciliations of reportable segment profit or loss to
the Company's consolidated totals.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total profit (loss) for reportable segments .... $ (1,394) $ (1,558) $ 1,779 $ (5,345)
Amortization of subsidiary acquisition
costs recognized in consolidation ............ (70) (70) (212) (212)
Unallocated corporate general and
administrative expenses ..................... (546) (413) (1,328) (1,286)
---------- ---------- ---------- ----------
Income (loss) before disposal of certain
operations and income taxes ................. (2,010) (2,041) 239 (6,843)
Operating results and loss on disposal of
certain operations in 1999 .................. (21) (1,371) 102 (1,644)
---------- ---------- ---------- ----------
Income (loss) before income taxes .............. $ (2,031) $ (3,412) $ 341 $ (8,487)
========== ========== ========== ==========
</TABLE>
NOTE 9 - SUBSEQUENT EVENTS
In early October 1999, Mexico experienced widespread flooding throughout the
southern part of the country. This flooding resulted in damage to four of the
Company's facilities. The greatest destruction was to the San Rafael plant,
which was completely flooded, and resulted in significant damage to the facility
and its contents. The remaining three facilities incurred minor damage. Although
physical damage to the Company's canning plant in Puebla was minor, the flooding
resulted in significant damage to the town's water supply system. Because the
Puebla facility is dependent on this water supply in its
10
<PAGE> 11
production process, this damage to the town's water system has caused a delay in
the scheduled opening of the plant for the canning season. The Company is
currently working with its insurance agents and underwriters to assess the
magnitude of the damages and file appropriate claims. Coverage's under the
Company's insurance policies are sufficient to cover all damage and business
interruption losses resulting from this flooding.
In November 1999, the Company amended its agreements with the owners of
Frutalamo, S.A. de C.V. ("Frutalamo") for the operation of the Frutalamo juice
processing plant. This amendment, among other things, 1) extended the term by
three years, 2) moved the contractual penalty of $1.0 million to the end of the
third extension year, 3) provided an option to buy the plant anytime during the
extension period for $6.9 million, of which $1.9 million has already been paid,
and 4) required the prepayment of the three year rents associated with the
extension period of $1.1million.
PART I. - ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The discussion in this Quarterly Report on Form 10-Q contains
forward-looking statements that involve risks and uncertainties. Statements
contained in this report that are not historical facts are forward-looking
statements that are subject to the safe harbor created by the Private Securities
Litigation Reform Act of 1995. A number of important factors could cause the
Company's actual results for 1999 and beyond to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company. These factors include, without limitation: growth and integration of
new businesses; uncertainty of new product development and market acceptance of
new products; dependence upon availability and price of fresh fruit;
competition; dependence upon significant customers; seasonality and quarterly
fluctuations; risk related to product liability and recall; limited intellectual
property protection; government regulation; dependence on key management;
economic, political and social conditions in Mexico; exchange rate fluctuations
and inflation; and labor relations and costs. These factors are listed under
"Risk Factors" in the Company's prospectus dated June 14, 1996.
CONVERSION TO U.S. GAAP
The Company conducts substantially all of its operations through its wholly
owned operating subsidiaries. ICMOSA is a Mexican corporation with its
headquarters located in Montemorelos, Nuevo Leon, Mexico, whose principal
activities consist of operating five citrus processing plants and various citrus
groves throughout Mexico. GISE is a Mexican corporation with its headquarters
located in Victoria, Tamaulipas, Mexico, whose principal activities consist of
operating three citrus juice and oil processing plants. ICMOSA and GISE maintain
their accounting records in Mexican pesos and in accordance with Mexican
generally accepted accounting principles and are subject to Mexican income tax
laws. ICMOSA's and GISE's financial statements have been converted to United
States generally accepted accounting principles ("U.S. GAAP") and U.S. dollars.
Flavorfresh maintains its accounting records in British pounds sterling and in
accordance with United Kingdom generally accepted accounting principles and is
subject to United Kingdom income tax laws.
Unless otherwise indicated, all dollar amounts included herein are set forth
in U.S. dollars in accordance with U.S. GAAP. The functional currency of UniMark
and its subsidiaries is the U.S. dollar.
11
<PAGE> 12
RESULTS OF OPERATIONS
The following table sets forth-certain consolidated financial data, after
reflecting 1) the disposition of certain operations disposed of during 1999 and
2) the reclassifications of customer discounts and allowances and freight
expenses ( which are more fully discussed in Note 1 to the condensed
consolidated statements), expressed as a percentage of net sales for the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------- ---------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales ...................................... 100.0% 100.0% 100.0% 100.0%
Cost of products sold .......................... 81.7 86.4 74.8 85.7
-------- -------- -------- --------
Gross profit ................................... 18.3 13.6 25.2 14.3
Selling, general and administrative expenses ... 24.3 23.9 19.0 23.0
-------- -------- -------- --------
Income (loss) from operations .................. (6.0) (10.3) 6.2 (8.7)
Other income (expense):
Interest expense ........................... (5.4) (4.9) (5.6) (4.0)
Interest income ............................ 0.4 0.3 0.3 0.2
Foreign currency transaction loss .......... (2.5) (0.2) (0.7) (1.3)
Other ...................................... 0.4 0.8 0.2 0.3
-------- -------- -------- --------
(7.1) (4.0) (5.8) (4.8)
-------- -------- -------- --------
Income (loss) before disposal of certain
operations and income taxes: .................. (13.1) (14.3) 0.4 (13.5)
Operating results and loss on disposal of
certain operations in 1999:
Operating income (loss) .................... (0.2) 1.0 0.2 (0.3)
Loss on disposal of operations ............. (10.6) (3.0)
-------- -------- -------- --------
Income (loss) before income taxes .............. (13.3) (23.9) 0.6 (16.8)
Income tax expense (benefit) ................... 5.8 3.2 0.2
-------- -------- -------- --------
Net income (loss) .............................. (7.5)% (20.7)% 0.6% (16.6)%
======== ======== ======== ========
</TABLE>
Three Months Ended September 30, 1998 and 1999
Net sales consist of sales of packaged fruit and citrus juice and oils.
Packaged fruit sales increased 15.5% from $10.3 million in 1998 to $11.9 million
in 1999. This increase was primarily due to an increase in sales to Japan of
$1.8.
Citrus juice and oil sales decreased 54.0% from $5.0 million in 1998 to $2.3
million in 1999. This decrease in juice and oil sales was primarily the result
of lower juice processing volume due to unfavorable material availability.
As a result of the foregoing, net sales for 1999 decreased by $1.1 million
from 1998 due largely to the decrease in citrus juice and oil sales.
Gross profit on packaged fruit sales decreased from 17.9% in 1998 to 13.2%
in 1999. This decrease was primarily the result of the higher fruit costs
associated with production outside the normal production season, as well as
lower volume from the shortage of certain fruit supplies.
Citrus juice and oil sales resulted in a gross profit of 19.1% in 1998 and
15.6% in 1999. This decrease was caused by unfavorable raw material costs as a
result of a smaller orange crop in Mexico this growing season. The third quarter
gross profit was significantly higher than the second quarter gross profit as a
result of improving market prices for concentrate frozen orange juice.
12
<PAGE> 13
Overall, gross profit as a percentage of net sales decreased from 18.3% in
1998 to 13.6% in 1999.
Selling, general and administrative expenses decreased from $3.7 million in
1998 to $3.4 million in 1999. This reduction is primarily due to decreases in
selling expenses associated with the lower sales volume.
Interest expense, net decreased from $.76 million in 1998 to $.66 million in
1999. This decrease was primarily the result of decreased levels of debt and the
capitalization of interest costs associated with the Company's lemon project of
$.18 million in 1999. See "Liquidity and Capital Resources."
Foreign currency transaction losses, which result from the conversion of the
Company's foreign subsidiaries' financial statements to U.S. GAAP, decreased
from a loss of $.4 million in 1998 to a slight loss in 1999. This reduction in
losses was primarily due to a smaller devaluation in the Mexican peso in the
1999 period than was incurred in the 1998 period.
Operating results and loss on disposal of certain operations in 1999 present
separately the operating results applicable to the disposed operations and the
transaction losses on the disposals. In the 1999 period these disposed
operations generated operating income of $.15 million and a one time $1.5
million loss from the write down of the carrying values to amounts received from
the subsequent sales, as compared to 1998 period were operations had an
immaterial loss. This increase in operating income was due primarily to improved
California fruit prices in 1999 quarter.
Income tax benefit of $.5 million was recorded in 1999 on a loss before
income taxes of $3.4 million due primarily to permanent differences between book
income, or loss, reported in Mexico (as stated in U.S. dollars and U.S. GAAP)
and Mexican taxable income, or loss, calculated in Mexican pesos according to
Mexican income tax laws. In addition, the Company has provided a valuation
allowance for net operating losses generated in the U.S., thus no income tax
benefits from U.S. operating losses are recognized.
As a result of the foregoing, the Company reported net losses of $1.2
million in 1998 and $3.0 million in 1999.
Nine Months Ended September 30, 1998 and 1999
Net sales consist of sales of packaged fruit and citrus juice and oils.
Packaged fruit sales increased 14.8% from $37.2 million in 1998 to $42.7 million
in 1999. This increase was primarily due to a 189% increase in sales to Japan
from $2.8 million in 1998 to $8.1 million in 1999.
Citrus juice and oil sales decreased 59.2% from $19.2 million in 1998 to
$7.8 million in 1999. This decrease in juice and oil sales was largely the
result of lower juice processing volume due to unfavorable raw material costs
compounded by a general decline in the market price of frozen concentrate orange
juice during the first half of 1999.
As a result of the foregoing, net sales decreased 10.6% from $56.4 million
in 1998 to $50.4 million in 1999 resulting from increased packaged fruit sales
being more than offset by the decline in citrus juice and oil sales.
Gross profit on packaged fruit sales decreased from 25.7% in 1998 to 18.4%
in 1999. This decrease was primarily the result of the increased business to
Japan which had to be processed towards the end of the orange season at
significantly higher costs than projected and lower than expected pineapple
production from the Company's pineapple project.
13
<PAGE> 14
Citrus juice and oil gross profit decreased from 24.2% in 1998 to 4.7% in
1999. This decrease was caused by unfavorable raw material costs as a result of
a smaller orange crop in Mexico this growing season compounded by a decline in
market prices for frozen concentrate orange juice.
Overall, gross profit as a percentage of net sales declined from 25.2% in
1998 to 14.3% in 1999.
Selling, general and administrative expenses increased from $10.7 million in
1998 to $11.6 million in 1999, or $.9 million. This increase is primarily due to
the write-off in June 1999 of deferred costs of $.6 million associated with a
trade name that became of limited value and increased professional fees
associated with management's efforts to improve its business processes and
internal controls.
Interest expense, net decreased from $3.0 million in 1998 to $1.9 million in
1999. This decrease was primarily the result of decreased levels of debt, the
netting of accrued interest from related party loans discussed in Note 3 and the
capitalization of interest cost associated with the Company's lemon project of
$.45 million. See "Liquidity and Capital Resources."
Foreign currency transaction losses, which result from the conversion of the
Company's foreign subsidiaries' financial statements to U.S. GAAP, increased
from a loss of $.4 million in 1998 to a loss of $.7 million in 1999, or an
increase of $.3 million. This increase was primarily due to the Mexican peso
devaluing at a faster rate in the 1999 period than in the 1998 period.
Operating results and loss on disposal of certain operations in 1999 present
separately the operating results applicable to the disposed operations and
transaction losses on the disposals. In the 1999 period these disposed
operations generated operating losses of $ .13 million and a one time $ 1.5
million loss from the write down of the carrying values to amounts received from
the subsequent sales, as compared to the 1998 period were operations had
operating income of $.1 million. This decrease in operating income was due to
higher fruit costs caused by the prior freeze damage sustained in the California
citrus groves.
Income tax expense of $.1 million was recorded in 1999 on a loss before
income taxes of $8.5 million due primarily to permanent differences between book
income, or loss, reported in Mexico (as stated in U.S. dollars and U.S.
generally accepted accounting principles) and Mexican taxable income, or loss,
calculated in Mexican pesos according to Mexican income tax laws. In addition,
the Company has provided a valuation allowance for net operating losses
generated in the U.S., thus no income tax benefits from U.S. operating losses
are recognized.
As a result of the foregoing, the Company reported net income of $.3 million
in 1998 and a net loss of $8.4 million in 1999.
STATUTORY EMPLOYEE PROFIT SHARING
All Mexican companies are required to pay their employees, in addition to
their agreed compensation benefits, profit sharing in an aggregate amount equal
to 10% of net income, calculated for employee profit sharing purposes, of the
individual corporation employing such employees. All of UniMark's Mexican
employees are employed by its subsidiaries, each of which pays profit sharing in
accordance with its respective net income for profit sharing purposes. Tax
losses do not affect employee profit sharing. Statutory employee profit sharing
expense is reflected in the Company's cost of goods sold and selling, general
and administrative expenses, depending upon the function of the employees to
whom profit sharing payments are made. The Company's net income (loss) on a
consolidated basis as shown in the Consolidated Financial Statements is not a
meaningful indication of net income of the Company's subsidiaries for profit
sharing purposes or of the amount of employee profit sharing.
14
<PAGE> 15
EXCHANGE RATE FLUCTUATIONS
The Company's consolidated results of operations are affected by changes in
the valuation of the Mexican peso to the extent that ICMOSA or GISE have peso
denominated net monetary assets or net monetary liabilities. In periods where
the peso has been devalued in relation to the U.S. dollar, a gain will be
recognized to the extent there are peso denominated net monetary liabilities
while a loss will be recognized to the extent there are peso denominated net
monetary assets. In periods where the peso has gained value, the converse would
be recognized.
The Company's consolidated results of operations are also subject to
fluctuations in the value of the peso as they affect the translation to U.S.
dollars of ICMOSA's net deferred tax assets or net deferred tax liabilities.
Since these assets and liabilities are peso denominated, a falling peso results
in a transaction loss to the extent there are net deferred tax assets or a
transaction gain to the extent there are net deferred tax liabilities.
MARKET RISK FACTORS
A significant portion of the Company's operations consists of processing and
sales activities in foreign jurisdictions. The Company processes its products in
the United States and Mexico and sells the products in those markets as well in
the Canadian and European markets and Japan. As a result, the Company's
financial results could be significantly affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in the foreign
markets in which the Company distributes its products. The Company's operating
results are exposed to changes in exchange rates between the U.S. dollar and the
Mexican peso and the British pound.
When the U.S. dollar strengthens against these foreign currencies, the value
of nonfunctional currency sales decreases. When the U.S. dollar weakens, the
functional currency amount of sales increases. Overall, the Company is a net
payer of currencies other than the U.S. dollar and, as such, benefits from a
stronger dollar.
The Company procures and processes substantially all of its products in
Mexico for export to the United States, Canada, Europe and Japan. The cost of
citrus procured in Mexico generally reflects the spot market price for citrus in
the United States and all of UniMark's export sales from Mexico are denominated
in U.S. dollars. As such, UniMark does not anticipate sales revenues and raw
material expenses to be materially affected by changes in the valuation of the
Mexican peso. Labor and certain other processing costs are Mexican peso
denominated and, consequently, these costs are impacted by fluctuations in the
value of the Mexican peso relative to the U.S.
dollar.
The Company's juice and oil segment primarily produces and sells frozen
concentrate orange juice. The price the Company is able to sell this product for
is generally determined by reference to the commodity futures market price, over
which the Company has no control.
The Company's interest expense is most sensitive to changes in the general
level of U.S. interest rates and London interbank offered rates ("LIBOR"). In
this regard, changes in these interest rates affect the interest paid on the
Company's debt.
DEPENDENCE UPON AVAILABILITY AND PRICE OF FRESH FRUIT
The Company obtains a substantial amount of its raw materials from
third-party suppliers throughout various growing regions in Mexico and Texas. A
crop reduction or failure in any of these fruit growing regions resulting from
factors such as weather, pestilence, disease or other natural disasters, could
increase the cost of the Company's raw materials or otherwise adversely affect
the Company's operations.
15
<PAGE> 16
Competitors may be affected differently depending upon their ability to obtain
adequate supplies from sources in other geographic areas. If the Company is
unable to pass along the increased raw materials cost, the financial condition
and results of operations of the Company could be materially adversely affected.
SEASONALITY
Demand for UniMark's citrus and tropical fruit products is strongest during
the fall, winter and spring when seasonal fresh products such as mangos,
peaches, plums, and nectarines are not readily available for sale in
supermarkets in North America. Management believes UniMark's quarterly net sales
will continue to be impacted by this pattern of seasonality.
YEAR 2000 ISSUES
As a result of certain computer programs and certain embedded computer chip
technology utilizing two digits rather than four to define the applicable year,
any of the Company's computer programs or systems that have date sensitive
software or computer chip technology may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, generate invoices, or
engage in similar normal business activities. Failure by the Company and/or any
third parties that the Company materially relies on, such as power utility
providers, financial institutions, other critical suppliers and major customers,
to complete Year 2000 readiness activities in a timely manner could have a
material adverse effect on the Company's business and results of operations.
The Company has engaged in a company-wide effort to achieve Year 2000
readiness for both information technology ("IT") and non-information technology
("non-IT") systems. The Company expects to achieve company-wide Year 2000
readiness by the end of 1999. The Company has formed a team consisting of senior
management, information technology staff and consultants to assess, remediate,
test and implement processes to meet Year 2000 readiness.
In late 1997, the Company completed its assessment of all IT systems which
indicated that most of the Company's significant accounting systems could be
affected, particularly the general ledgers, billing, inventory and payment
systems. The Company has now completed implementation of Year 2000 compliant
accounting systems in all of its operations. The Company does not believe that
non-IT systems are material to its operations; however, the Company has
completed its review and testing of such systems which has not revealed any
significant problems.
The Company has inquired of its significant suppliers, contractors and other
third-party support services and customers to assess their Year 2000 readiness
efforts. Letters of compliance have been requested from such third parties. To
date, the Company is not aware of any external agent with a Year 2000 issue that
would materially impact the Company's results of operations, liquidity or
capital resources. However, the Company has no means of ensuring that external
agents will be Year 2000 ready. Contingency plans to choose alternative
third-party agents, if necessary, will be formalized in the fourth quarter of
1999.
The Company is primarily utilizing internal resources to assess, remediate,
test and implement Year 2000 modifications while utilizing outside consultants
when necessary. The total cost of the Year 2000 project is not expected to
exceed $100,000 for the entire effort. Because the Company's readiness program
is not yet fully implemented and is subject to certain risks and uncertainties,
including readiness efforts of material third parties, there can be no assurance
that the Company will not incur material costs beyond the anticipated costs
described above. The cost of the Year 2000 project and the dates by which the
Company believes it will be Year 2000 ready are based on management's current
best estimates, which were dependent on numerous assumptions of future events,
including the continued availability of certain
16
<PAGE> 17
resources, third-party modification plans and other factors. There can be no
assurance, however, that these estimates will be achieved and actual results
could differ materially from those anticipated.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, cash and cash equivalents totaled $5.3 million, an
increase of $1.0 million from year-end 1998. During 1999, operating activities
utilized cash of $2.9 million primarily due to current operating losses.
The Company's financing activities provided net cash of $5.0 million from
the sale of common stock and $2.9 million from additional short-term borrowings
under its existing lines of credit. On March 29, 1999, the Company sold
2,000,000 newly issued shares of common stock at a purchase price of $2.50 per
share, for an aggregate purchase price of $5,000,000 to M & M. In connection
with the transaction, M & M surrendered options to acquire additional 2,000,000
shares of common stock at a purchase price of $4.5375 per share issued to them
in July 1998.
In April 1998, GISE and The Coca-Cola Export Corporation ("Coca-Cola"), an
affiliate of The Coca-Cola Company, entered into a new twenty year Supply
Contract (the "Lemon Project"), with a ten year renewal option, for the
production of Italian lemons. Pursuant to the terms of the new Supply Contract,
which supersedes all previous agreements, GISE will plant and grow 3,500
hectares (approximately 8,650 acres) of Italian lemons within the next three
years for sale to Coca-Cola at pre-determined prices. The Supply Contract
requires Coca-Cola to provide, free of charge, up to 875,000 lemon trees, enough
to plant approximately 2,800 hectares. In addition, the Supply Contract requires
Coca-Cola to purchase all the production from the project. The planting program
began in November 1996 and harvesting of the first crops is projected to begin
in late 2000 with full production scheduled for 2003.
The status of the Lemon Project as of September 30, 1999 is as follows:
<TABLE>
<CAPTION>
Hectares Acres
-------- -----
<S> <C> <C>
Land -
Acquired 3,025 7,475
Unpurchased or Subcontracted 475 1,175
Preparation and Planting -
Prepared and planted 1,850 4,571
Prepared but not planted 1,000 2,471
Acquired land to be prepared and planted 175 432
Expenditures -
Total projected expenditures $18.5 million
Incurred since inception 8.5 million
Remaining in 1999 3.6 million
Projected for year 2000 and beyond 6.4 million
</TABLE>
During 1999, UniMark utilized cash of $3.5 million in investing activities.
Of this amount, $2.9 million was expended on property and equipment related to
the Company's Lemon Project.
The Company has existing loan agreements with Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A. ("Rabobank Nederland") to provide short-term
dollar denominated debt of up to $17.4 million. These agreements are as follows:
(i) a revolving credit agreement to provide up to $9.5 million of committed
funds collateralized by finished goods inventories in the U.S. and accounts
receivable from U.S. customers and (ii) revolving credit agreements to provide
discretionary uncommitted lines up to $7.9 million collateralized by finished
goods inventories in Mexico and accounts receivable from export sales by the
17
<PAGE> 18
Company's Mexican subsidiaries. At September 30, 1999 the Company had
outstanding loan balances under the revolving credit agreements of $14.8
million.
These agreements are cross-collateralized and guaranteed by the Company and
its subsidiaries and require the Company to maintain certain consolidated
financial performance levels relative to tangible net worth, working capital,
and total debt. In addition, the agreements contain restrictions on the issuance
of additional shares of stock and the payment of dividends, among other things,
without the prior written consent of the bank. At December 31, 1998, the Company
was in violation of certain consolidated financial performance covenants and
restrictions under these agreements, which the lender waived as of that date. In
addition, the primary lender extended the maturity of the agreements from May
17, 1999 to January 3, 2000.
As of June 30, 1999 and September 30, 1999 the Company was not in compliance
with certain covenants of its loan agreements with its primary lender including
covenants that restrict transactions with affiliates and consolidated financial
performance ratios relative to working capital, total debt and debt service and,
accordingly is in default of these agreements. The Company has received waivers
of these defaults from the primary lender. Under terms of the waivers, the
primary lender agreed to maintain the committed lines of $9.5 million and
reduced its discretionary uncommitted lines to the Company's Mexican operations
to $7.9 million, until March 1, 2000. In addition, at December 30, 1999 the
interest rates associated with these lines will increase by 200 basis points and
the Company agreed to pledge under the agreements one of the short-term notes
associated with the sales discussed in Note 2 above. The primary lender also
consented to the sales associated with the disposal of certain operations
discussed in Note 2.
Presently, the Company is in discussions with other financial institutions
regarding replacement of part, or all, of its existing debt with the primary
lender. In August 1999, the Company entered into an agreement with a Mexican
bank to provide a $3.5 million credit line. In November 1999, the Company
entered into a non-binding letter of intent with a Mexican investment trust for
long-term financing at GISE of up to $5.0 million which is subject to normal due
diligence and completion of documentation. This financing, if consummated, would
represent an equity interest in GISE of approximately 17.5%. There can be no
assurance that the Company will be able to find replacement financing or
consummate the GISE transaction. As a result of the sales associated with the
disposed operations, the Company will receive approximately $1.8 million of sale
proceeds during the remainder of 1999 that will be used of operations.
The Company's cash requirements for the remainder of 1999 and beyond will
depend primarily upon the level of sales, expenditures for capital equipment and
improvements, investments in agricultural projects, the timing of inventory
purchases and scheduled reductions of debt. Management believes that it will not
generate sufficient cash flow from operations until the year 2000 to service its
debt obligations and capital expenditures. As a result, the Company is
developing a restructuring plan to improve operating results and cash flow. The
plan will include actions to increase short-term cash flow as well as a program
to reorganize operations and improve operating efficiencies for the long-term.
Current levels of financing are insufficient to meet the Company's current cash
requirements for the remainder of 1999. The future success of the Company
depends on its ability to obtain replacement credit facilities for some or all
of its primary lender debt, obtain additional debt and raise additional equity
through sale of unregistered securities. There can be no assurance that the
Company's efforts to raise such additional financing will be successful, and
under certain circumstance, the Company may be required to limit its operations,
dispose of certain assets and take other actions as considered necessary.
18
<PAGE> 19
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to legal actions arising in the ordinary course of
business. Management does not believe that the outcome of any such legal action
would have a material adverse effect on the Company's financial position or
results of operations.
ITEM 2. SALE OF UNREGISTERED SECURITIES
On March 29, 1999, the Company sold 2,000,000 newly issued shares of Common
Stock, par value $.01 per share, for a purchase price of U.S. $2.50 per share,
or an aggregate purchase price of U.S. $5,000,000 in cash, to M & M Nominee
L.L.C. ("M & M"). The sale of securities was made in reliance upon Section 4(2)
of the Securities Act of 1933, as amended, and Regulation D, promulgated
thereunder, as an offering only to an accredited investor. In connection with
the transaction, M & M surrendered options to acquire 2,000,000 shares of Common
Stock granted to them in July 1998.
ITEM 3. DEFAULTS UPON SENIOR SECURITES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
27 Financial Data Schedule
B. Reports on Form 8-K
On October 26, 1999 the Company filed a current report on Form 8-K
announcing that on October 11,1999 the Company had sold all the issued
and outstanding shares of capital stock of Les Produits Deli-Bon Inc.,
a Quebec corporation to Francois Gravil - Guy Picard ("Buyers"), in
trust for the company to be owned and operated by the Buyers.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE UNIMARK GROUP, INC.
-----------------------
Registrant
Date: November 12, 1999 /s/ Soren Bjorn
----------------- -----------------------------------------
Soren Bjorn, President
(Principal Executive Officer)
Date: November 12, 1999 /s/ Charles A. Horne
----------------- -----------------------------------------
Charles A. Horne, Chief Financial Officer
(Principal Accounting Officer)
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 5,259
<SECURITIES> 0
<RECEIVABLES> 8,541
<ALLOWANCES> 369
<INVENTORY> 18,050
<CURRENT-ASSETS> 39,658
<PP&E> 50,189
<DEPRECIATION> 9,116
<TOTAL-ASSETS> 89,947
<CURRENT-LIABILITIES> 37,287
<BONDS> 7,323
0
0
<COMMON> 139
<OTHER-SE> 45,198
<TOTAL-LIABILITY-AND-EQUITY> 89,947
<SALES> 50,434
<TOTAL-REVENUES> 50,434
<CGS> 43,219
<TOTAL-COSTS> 43,219
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 31
<INTEREST-EXPENSE> 2,024
<INCOME-PRETAX> (8,487)
<INCOME-TAX> (137)
<INCOME-CONTINUING> (8,350)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,350)
<EPS-BASIC> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
